China Publishes Environmental and Social Disclosure Rules for Listed Companies

In our blog post on 13 May 2021, we discussed the consultation papers published by the China Securities Regulatory Commission (“CSRC”) on proposed ESG-related amendments to the disclosure rules applicable to listed companies. On 28 June 2021, the CSRC published the final set of amendments (“Final Amendments”) to the disclosure rules applicable to annual reports and half-year reports, respectively, together with relevant explanations to the amendments (“Explanations”).

In the Explanations, the CSRC highlights the following key goals of the revised and updated disclosure rules as they relate to environmental and social responsibility:

1. To emphasize a listed company’s role in promoting environmental protection and social responsibility as a public company;
2. To require listed companies to disclose any administrative penalties relating to environmental issues during the disclosure reporting period;
3. To achieve the goal of “emission peak” (碳达峰) and “carbon neutrality” (碳中和) in China by motivating listed companies to voluntarily disclose their work to reduce carbon emissions; and
4. To revitalize rural areas by encouraging listed companies to proactively disclose their work on alleviating poverty.

We note that few changes have been made to Section 5 on Environmental and Social Responsibility in the Final Amendments to achieve these goals. For a summary of the ESG-related aspects of the rules, please see our earlier blog post.

The Final Amendments should help clarify the ESG-related disclosure requirements for listed companies in China. While disclosures relating to carbon reduction are encouraged on a voluntary basis, listed companies should strongly consider implementing this approach as significant global attention to climate change (particularly in light of the pivotal COP26 meeting in November) could spur regulators in China and elsewhere to implement mandatory climate-related disclosures in the near- to mid-term.

Other major changes in the Final Amendments include disclosure rules applicable to companies listed on the ChiNext market and the Science and Technology Innovation Board in China, disclosures relating to listed companies’ material customers and suppliers, and voting rights of shareholders.